TRIO-TECH INTERNATIONAL
355 Parkside Drive
San Fernando, California 91340
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 8, 1997
The Annual Meeting of Shareholders ("Annual Meeting") of Trio-Tech
International (the "Company") will be held at the Miramar Sheraton Hotel Santa
Monica, located at 101 Wilshire Boulevard, Santa Monica, California, on Monday,
December 8, 1997 at 10:00 A.M., local time, for the following purposes, as set
forth in the attached Statement:
1. To elect directors to hold office until the next annual meeting of
shareholders;
and
2. To approve the Company's 1998 Stock Option Plan.
and
3. To approve the Directors Stock Option Plan.
and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on October 24, 1997
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
Shareholders are cordially invited to attend the Annual Meeting in person.
Whether you plan to attend the Annual Meeting or not, please complete, sign and
date the enclosed Proxy Card and return it without delay in the enclosed
postage-prepaid envelope. If you do attend the Annual Meeting, you may withdraw
your Proxy and vote personally on each matter brought before the meeting.
DALE C. CHEESMAN
Secretary
October 24, 1997
<PAGE>
TRIO-TECH INTERNATIONAL
355 Parkside Drive
San Fernando, California 91340
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
December 8, 1997
This Proxy Statement is furnished in connection with the solicitation of
the enclosed Proxy on behalf of the Board of Directors of Trio-Tech
International, a California corporation ("Trio-Tech" or the "Company"), for use
at the annual meeting of shareholders of the Company (the "Annual Meeting") to
be held on Monday, December 8, 1997 and at any adjournments thereof, for the
purposes set forth in the accompanying notice. This Proxy Statement and the
enclosed Proxy are being mailed to shareholders on or about November 7, 1997.
The close of business on October 24, 1997 has been fixed as the record date
for shareholders entitled to notice of and to vote at the Annual Meeting. As of
that date, there were 1,962,662 shares of the Company's common stock (the
"Common Stock") outstanding and entitled to vote, the holders of which are
entitled to one vote per share.
In the election of directors, a shareholder may cumulate his votes for one
or more candidates, but only if each such candidate's name has been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting, prior to the voting, of his intention to cumulate his votes. If any
one shareholder has given such notice, all shareholders may cumulate their votes
for the candidates in nomination. If the voting for directors is conducted by
cumulative voting, each share will be entitled to a number of votes equal to the
number of directors to be elected. These votes may be cast for a single
candidate or may be distributed among two or more candidates in such proportions
as the shareholder thinks fit. The seven candidates receiving the highest
number of affirmative votes will be elected. Discretionary authority to
cumulate votes is solicited hereby.
Shareholders are requested to date, sign and return the enclosed Proxy to
make certain their shares will be voted at the Annual Meeting. Any Proxy given
may be revoked by the shareholder at any time before it is voted by delivering
written notice of revocation to the Secretary of the Company, by filing with him
a Proxy bearing a later date, or by attending the Annual Meeting and voting in
person. All Proxies properly executed and returned will be voted in accordance
with the instructions specified thereon. If no instructions are specified,
Proxies will be voted in favor of the election of the seven nominees for
directors named under "Election of Directors." Because abstentions with respect
to any matter other than the election of directors are treated as shares present
or represented and entitled to vote for purposes of determining whether that
matter has been approved by the shareholders, abstentions have the same effect
as negative votes. Broker non-votes and shares as to which proxy authority has
been withheld with respect to any matter are not deemed to be present or
represented for purposes of determining whether shareholder approval of that
matter has been obtained.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of October 24, 1997,
regarding the beneficial ownership of the Common Stock by (i) all persons known
by the Company to be the beneficial owners of more than 5% of its Common Stock,
(ii) each of the directors of the Company, and (iii) all officers and directors
of the Company as a group. To the knowledge of the Company, unless otherwise
indicated, each of the shareholders has sole voting and investment power with
respect to shares beneficially owned, subject to applicable community property
and similar statutes.
<TABLE>
<CAPTION>
Shares Owned
Beneficially as of
Name October 24, 1997 (1) Percent of Class
(1)
<S> <C> <C> <C>
Yong Siew Wai 298,174 (2) 14.9%
Lani Bray (Guy) 219,750 (3) 11.2%
Frank S. Gavin 73,736 (4) 3.7%
Richard M. Horowitz 185,002 (5) 9.4%
A. Charles Wilson 209,109 (6) 10.4%
Victor Ting Hock Ming 97,703 (7) 4.9%
William L. Slover 14,375 (8) 0.7%
F.D. (Chuck) Rogers 6,125 (9) 0.3%
Jason Adelman 28,325 (10) 1.4%
Dale C. Cheesman 2,087 (11) 0.1%
All Directors and
Officers as a group (9 914,636 43.0%
persons)
</TABLE>
(1) The percentages shown for each individual and for all officers and directors
as a group are based upon 1,962,662 outstanding, and assume the exercise of
options exercisable within 60 days, held by that individual or by all
officers and directors, as the case may be.
<PAGE>
(2) Includes options to purchase 36,250 shares from the Company at exercise
prices ranging from $1.52 to $7.70 per share. 261,924 shares are owned
outright .
(3) 38,938 are held directly by Ms. Bray and 180,812 shares are held in a trust
for which Ms. Bray serves as a trustee.
(4) Includes options to purchase 5,000 shares from the Company at an exercise
price of $7.70. 68,736 shares are owned outright.
(5) Includes options to purchase 5,000 shares from the Company at an exercise
price of $7.70. The 180,002 shares held outright are held in a trust for
which Mr. Horowitz serves as a trustee.
(6) Includes options to purchase 47,500 shares from the Company at exercise
prices ranging from $1.60 to $7.70 per share. 161,609 shares held outright
are held in a trust for which A. Charles Wilson serves as trustee.
(7) Includes options to purchase 32,250 shares from the Company at exercise
prices ranging from $1.52 to $3.67 per share. 65,453 shares are owned
outright.
(8) Consists of options to purchase 14,375 shares from the Company at exercise
prices ranging from $1.60 to $7.70 per share.
(9) Includes options to purchase 5,000 shares from the Company at an exercise
price of $7.70 per share. 1,125 shares are owned outright.
(10) Includes options and warrants to purchase 18,125 shares from the Company at
exercise prices ranging from $4.67 to $7.70 per share. 10,200 shares are
owned outright.
(11) Includes options to purchase 375 shares from the Company at an exercise
price of $3.67 per share. 1,712 shares are owned outright.
The Company does not know of any arrangements that may at a subsequent date
result in a change of control of the Company.
ELECTION OF DIRECTORS
The Board has nominated the persons listed below for election to the Board
at the Annual Meeting, to hold office until the next annual meeting and until
their respective successors are elected and qualified. It is intended that the
Proxies received, unless otherwise specified, will be voted for the seven
nominees named below, all of whom are incumbent directors of the Company. It is
not contemplated that any of the nominees will be unable or unwilling to serve
as a director but, if that should occur, the persons designated as Proxy holders
will vote in accordance with their best judgment. In no event will Proxies be
voted for a greater number of persons than the number of nominees named in this
Proxy Statement. Set forth below are the names of each of the seven nominees
for election as a
<PAGE>
director, his principal occupation, age, the year he became a
director of the Company, and additional biographical data.
A. Charles Wilson
Mr. Wilson, age 73, has served as a Director of Trio-Tech since 1966, and
was President and Chief Executive Officer of the Company from 1981 to 1989. In
1989, he was elected Chairman of the Board. Mr. Wilson is also Chairman of the
Board of Ernest Paper Products, Inc. as well as an attorney admitted to practice
law in California.
Yong Siew Wai
Mr. Yong, age 44, has been a Director of Trio-Tech since 1990. He has been
the President and Chief Executive Officer since 1990. He has been associated
with Trio-Tech International Pte. Ltd. in Singapore since 1976 and has been its
Managing Director since August 1980. Mr. Yong holds a Masters Degree in
Business Administration, Graduate Diploma in Marketing Management and a Diploma
in Industrial Management.
Frank S. Gavin
Mr. Gavin, age 44, has been a Director of Trio-Tech since 1991. He has been
a Sales and Marketing Manager for Group T in Scottsdale, Arizona since 1992. He
served as Vice-President, Sales and Marketing at Trio-Tech International from
1991 to 1992. Prior thereto Mr. Gavin was the President of Express Test
Corporation, Sunnyvale, California, which he founded in l984, and President of
Best Reps, Inc., a manufacturers' representative sales group, which he founded
in l982.
Richard M. Horowitz
Mr. Horowitz, age 55, has served as a Director of Trio-Tech since 1990. He
has been President of Management Brokers Insurance Agency since 1974. He also
serves as Chairman of Leviathan Corporation, a computer sales, consulting and
software company, and is Chairman of Dial 800, Inc., a national
telecommunication company.
William L. Slover
Mr. Slover, age 75, has served as a Director since 1989. He has been a
management consultant since 1983. Mr. Slover served as President and Chief
Executive Officer of Delphi Communications Corporation, a developer of voice
and test mail systems and automated telephone answering services. Prior
thereto, he served as Group Executive and Vice-President of General Instrument
Corporation from 1974 to 1978 and as Vice-President and General Manager of Ampex
Corporation from 1972-1974. Mr. Slover also served on the Board of Directors of
several privately held venture capital start-up companies.
<PAGE>
F.D. (Chuck) Rogers
Mr. Rogers, age 54, has been a Director of Trio-Tech since 1996. He is a
Managing Director, Mergers/Acquisitions at H.J. Meyers & Co., Inc., an
investment bank that focuses on emerging market investments. He has been with
that firm since l988 specializing in merger/acquisitions and expansion funding.
From l984-l988 Mr. Rogers served as Vice-President, Corporate Development of Geo
International, a NYSE conglomerate involved in the petroleum industry and non-
destructional testing. Prior thereto, from l982-l984, he served as Vice-
President and General Manager of Baker International's Tubular Products Division
and from l975-l982, served in various general manager positions with Masco
Corporation's Grant Oil Tool Company and Hydril & Company. Mr. Rogers also has
served on the Board of Directors of several public and private companies and is
presently a member of the Advisory Board of USC's School's Neurologic
Institute. He was elected by the Directors to the Board on October 21, 1995.
Jason T. Adelman
Jason Adelman, age 29, was elected to the Board of Trio-Tech in April 1997.
Mr. Adelman is a Managing Director of Corporate Finance at Paragon Capital
Corporation, a New York based investment bank. Prior to joining Paragon
Capital, Mr. Adelman was affiliated with Spencer Trask Securities, Inc., a New
York based venture capital investment bank from 1996 to 1997. Before that, he
was with Coopers & Lybrand LLP, where he worked in the financial services
consulting practice from 1994 to 1996. Mr. Adelman is an honors graduate of the
University of Pennsylvania and Cornell Law School and is a member of the New
York Bar. Information Regarding the Board of Directors and Its Committees
The Board held three meetings in person during the fiscal year ended June
27, 1997. Six of the directors attended in person and one attended by telephone
all the meetings of the Board and its committees on which they served during the
fiscal year. The Company does not have a nominating committee, and the
directors nominated for election at the Annual Meeting were nominated by the
entire Board.
The Board has a standing Compensation Committee, which currently consists
of S.W. Yong, Frank Gavin, Jason Adelman and A. Charles Wilson. The
Compensation Committee administers the Company's existing stock option plan and
determines salary and bonus arrangements. The Compensation Committee met three
times during the past fiscal year.
The Board has a standing Audit Committee, which currently consists of William
Slover, F.D. (Chuck) Rogers and Richard Horowitz. The Audit Committee meets
with the independent public accountants to review planned audit procedures, and
reviews with the independent public accountants and management the results of
the audit, including any recommendations of the independent public accountants
for improvements in accounting procedures and internal controls. The Audit
Committee held three meetings during the year ended June 27, 1997.
<PAGE>
Executive Officers
Victor Ting, age 44, first joined Trio-Tech as the Financial Controller for
the Company's Singapore subsidiary in l980. He was promoted to the level of
Business Manager from l985-l989. In December l989 he became the Director of
Finance and Sales & Marketing and later, the General Manager of the Singapore
subsidiary. Mr. Ting was appointed Vice-President and Chief Financial Officer of
Trio-Tech International in November l992. Mr. Ting holds a Bachelor of
Accountancy Degree and Masters Degree in Business Administration.
Dale Cheesman, age 55, has been associated with Trio-Tech International
since 1991 as Corporate Controller. Prior thereto Mr. Cheesman served as
Controller for IPD/Interpark in Sherman Oaks, California from 1990 to 1991,
Chief Financial Officer of Gamma Electronics in Santa Monica, California from
1989 to 1990 and Subsidiary Treasurer and Controller to Comtal/3M in Pasadena,
California from 1983 to 1989. Mr. Cheesman was President of Cheesman Associates
Inc., a Triple Check Franchise, from 1979 to 1983 and Project Controller for
USC's NICEM/NISCEM Project in Los Angeles, California while attending Graduate
School in 1978 and 1979. Mr. Cheesman holds a Bachelor of Science Degree in
Business Administration and Accounting with Graduate courses from Wharton
Business School (University of Pennsylvania), University of Chicago, University
of South Florida and University of Southern California. He was appointed
Secretary of Trio-Tech in April 1997.
Other Key Employees
Simon Costello, age 42, served as Managing Director of VIP Microelectronics
from l987 to l989 and held a variety of positions with that company in sales and
engineering from l984 to l987. Mr. Costello joined Trio-Tech International in
May l989 as Managing Director of Trio-Tech Ireland and the European Electronic
Test Center. He was appointed the General Manager for USA and Europe operations
in January l993. Mr. Costello has a Bachelor's Degree in Electronic Engineering
from Dublin City University.
Richard Lim, age 38, joined Trio-Tech in l982 and became the Quality
Assurance Manager in l985. He was promoted to the position of Operations
Manager in l988. In l990 he was promoted to Business Manager and was responsible
for the Malaysian operations in Penang and Kuala Lumpur. Mr. Lim became the
General Manager of the Company's Malaysia subsidiary in l99l and in February of
l993, all test facilities in the Far East came under his responsibility. He
holds diplomas in Electronics & Communications and Industrial Management and a
Masters Degree in Business Administration.
Terry Fong, age 43, has been with Trio-Tech since l978 and served as
Service Manager from l980. He was the Sales/Service Manager from l983-l986. In
l987 he played a key role in the set up of the Trading Operation in that he was
instrumental in the appointment of principals and selection of products. Mr.
Fong became the Area Sales/Service Manager in l990 responsible for Regional
sales. He was promoted to be Operations Manager (Trading) in l992 assuming
overall responsibility for the area and has recently became the General Manager
of Trading. Mr. Fong holds diplomas in Manufacturing and Marketing and a
Masters Degree in Business Administration.
<PAGE>
Lee-Soon Siew Kuan, age 39 joined Trio-Tech in l98l and became the
Administrative Manager in l985. In l988 she was promoted to
Personnel/Administration Manager and her responsibilities extended to include
the Penang operation. She became the Logistics Manager in l990 and the
Purchasing/Store and Traffic as well as the Kuala Lumpur Operation was added to
her coverage. In l99l Mrs. Lee was promoted to Group Logistics Manager and
currently the Director of Logistics, responsible for the Human Resources,
Purchasing/Store and Traffic functions of all the Operations in the Far East.
She holds a diploma in Personnel Management.
PROPOSAL TO APPROVE THE COMPANY'S
1998 STOCK OPTION PLAN
On September 30, 1997, the Company's Board of Directors unanimously
approved the Company's 1998 Stock Option Plan, subject to stockholder approval.
The purpose of the 1998 Stock Option Plan is to enable the Company to attract
and retain top-quality employees, officers, directors and consultants and to
provide them with an incentive to enhance stockholder return. The full text of
the 1998 Stock Option Plan appears as Exhibit 1 to this Proxy Statement and the
description of the Plan herein is qualified by reference to the text of the
Plan.
As of October 24, 1997, the Company had outstanding stock options to
officers, directors and employees to purchase an aggregate of 168,750 shares of
Common Stock, either pursuant to its previous stock option plan or as non-
qualified options granted outside the plan. No further options will be granted
under the previous plan. In addition, as of that date, the Company had granted
options for 45,000 shares to it's directors, subject to shareholder approval,
under the Directors Stock Option Plan discussed below.
DESCRIPTION OF THE 1998 STOCK OPTION PLAN
The key terms of the 1998 Stock Option Plan are outlined below.
The 1998 Stock Option Plan provides for the grant of options to officers,
directors, other key employees and consultants of the Company to purchase up to
an aggregate of 300,000 shares of Common Stock. The 1998 Stock Option Plan is
administered by the Board of Directors or a committee of the Board, and is
currently administered by the Board of Directors, which has complete discretion
to select the optionees and to establish the terms and conditions of each
option, subject to the provisions of the 1998 Stock Option Plan. Options granted
under the 1998 Stock Option Plan may be "incentive stock options" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified options, and will be designated as such.
The exercise price of stock options under the 1998 Stock Option Plan may
not be less than 100% of the fair market value of the Company's Common Stock as
of the date of grant (110% of the fair market value if the grant is to an
employee who owns more than 10% of the total combined voting power of all
classes of capital stock of the Company). The Code currently limits to $100,000
the aggregate value of Common Stock that may be acquired in any one year
pursuant to incentive stock options under the 1998 Stock Option Plan or any
other option plan adopted by the Company. Nonqualified options also may be
<PAGE>
granted without regard to any restriction on the amount of Common Stock that may
be acquired pursuant to such options in any one year.
In general, upon termination of employment of an optionee, all options
granted to such person which were not exercisable on the date of such
termination would immediately terminate, and any options that are exercisable
would terminate three months (six months in the case of termination by reason of
death or disability) following termination of employment.
Options may not be exercised more than ten years after the grant (five
years after the grant if the grant is an incentive stock option to an employee
who owns more than 10% of the total combined voting power of all classes of
capital stock of the Company). Options granted under the 1998 Stock Option Plan
are not transferable and may be exercised only by the respective grantees during
their lifetime or by their heirs, executors or administrators in the event of
death. Under the 1998 Stock Option Plan, shares subject to canceled or
terminated options are available for subsequently granted options. The number
of options outstanding and the exercise price thereof are subject to adjustment
in the event of changes in the outstanding Common Stock by reason of stock
dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events. The 1998 Stock Option Plan
is effective for ten years, unless sooner terminated or suspended. The 1998
Stock Option Plan provides that no person shall be granted options covering
more than 100,000 shares of Common Stock during any twelve month period.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive stock options under the 1998 Stock Option Plan are afforded
favorable federal income tax treatment under the Code. If an option is treated
as an incentive stock option, the optionee will recognize no income upon grant
or exercise of the option unless the alternative minimum tax rules apply. Upon
an optionee's sale of the shares (assuming that the sale occurs more than two
years after grant of the option and more than one year after exercise of the
option), any gain will be taxed to the optionee as long-term capital gain. If
the optionee disposes of the shares prior to the expiration of the above holding
periods, then the optionee will recognize ordinary income in an amount generally
measured as the difference between the exercise price and the lower of the fair
market value of the shares at the exercise date or the sale price of the shares.
Any gain or loss recognized on such a premature sale of the shares in excess of
the amount treated as ordinary income will be characterized as capital gain or
loss.
All other options granted under the 1998 Stock Option Plan are nonstatutory
stock options and will not qualify for any special tax benefits to the optionee.
An optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. However, upon exercise of the nonstatutory
stock option, the optionee will recognize ordinary income for federal income tax
purposes in an amount generally measured as the excess of the then fair market
value of each share over its exercise price. Upon an optionee's resale of such
shares, any difference between the sale price and the fair market value of such
shares on the date of exercise will be treated as capital gain or loss.
Subject to the limits on deductibility of employee remuneration under
Section 162(m) of the Code, the Company will generally be entitled to a tax
deduction in the amount that an optionee recognizes as ordinary income with
respect to an option. Options granted to executive officers under the 1998
Stock
<PAGE>
Option Plan are intended to qualify as performance-based compensation for
purposes of Section 162(m) of the Code, and the Company will generally be
entitled to a tax deduction in the amount recognized by such officers upon
exercise of the options. No tax authority or court has ruled on the
applicability of Section 162(m) to the 1998 Stock Option Plan and any final
determination of the deductibility of amounts realized upon exercise of an
option granted under the 1998 Stock Option Plan could ultimately be made by the
Internal Revenue Service or a court having final jurisdiction with respect to
the matter. The Company retains the right to grant options under the 1998 Stock
Option Plan in accordance with the terms of the 1998 Stock Option Plan
regardless of any final determination as to the applicability of Section 162(m)
of the Code to these grants.
The foregoing does not purport to be a complete summary of the federal
income tax considerations that may be relevant to holders of options or to the
Company. It also does not reflect provisions of the income tax laws of any
municipality, state or foreign country in which an optionee may reside, nor does
it reflect the tax consequences of an optionee's death.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE COMPANY'S 1998 STOCK OPTION PLAN.
PROPOSAL TO APPROVE THE DIRECTORS STOCK OPTION PLAN
On September 30, 1997, the Company's Board of Directors unanimously
approved the Directors Stock Option Plan (the "Directors Plan"), subject to
shareholder approval. The purpose of the Directors Plan is to give appropriate
compensation to the Directors of the Company. The Company currently pays to its
non-employee Directors $5,000 per year and $1,500 per meeting attended (and to
the Chairman of the Board $15,000 per year and $4,500 per meeting attended),
which the Company believes is substantially less than directors of comparable
public companies are paid. Directors are also reimbursed for out-of-pocket
expenses incurred in attending meetings. The Company believes that the
Directors Plan will provide non-employee Directors and the President of the
Company (if he or she is a Director of the Company) a favorable opportunity to
acquire Common Stock of the Company and will create an incentive for them to
serve on the Board of Directors of the Company and contribute to its long- term
growth and profitability objectives. The full text of the Directors Stock Option
Plan appears as Exhibit 2 to this Proxy Statement and the description of the
Plan herein is qualified by reference to the text of the Plan.
General Provisions. The Directors Plan provides for the grant to Directors
of the Company of options to purchase up to 150,000 shares of Common Stock. The
Directors Plan is administered by the Board of Directors or a committee of the
Board (the "Administrator"). The persons eligible to participate in the
Directors Plan are the duly elected non-employee Directors and the President (if
he or she is a director of the Company) of the Company (currently seven
individuals). The Administrator determines the meaning and application of the
provisions of the Directors Plan and related option agreements.
<PAGE>
Options granted under the Directors Plan are nonqualified stock options.
The Directors Plan provides that each participant shall receive a grant of
options, on the first business day of July in each year, to purchase 5,000
shares of Common Stock or, in the case of the President and the Chairman of the
Board, 10,000 shares of Common Stock. In addition, a participant shall receive
a grant of options to purchase 5,000 shares of Common Stock upon his or her
initial election to the Board, provided that if such election occurs after
December 31 of the fiscal year first elected, such initial grant shall be for
one-half of that number of shares of Common Stock. The exercise price of each
option granted under the Directors Plan shall be 85% of the fair market value of
the underlying shares on the date of grant. Each option is fully exercisable on
the date of the grant and has a term of five years from the date of the grant.
No options may be granted after September 30, 2007. Options granted under the
Directors Plan will be in addition to the cash fee paid to each non-employee
Director.
After approving the Directors Plan at the September 30, 1997 Board meeting,
options for 10,000 shares each were granted to the President and the Chairman of
the Board, and options for 5,000 shares each were granted to the five other non-
employee Directors, at an exercise price of $7.70 per share (after giving effect
to the 3-for-2 stock split of the Company's Common Stock to shareholders of
record on that date). These option grants are subject to shareholder approval
of the Directors Plan, and if the Directors Plan does not receive the requisite
shareholder approval at the Annual Meeting, these options will be void and of no
effect.
Generally, options may be exercised only by the individual to whom the
option is granted, and are not transferable or assignable, except that in the
event of an optionee's death or legal disability, the optionee's heirs or legal
representatives may exercise the options for a period not to exceed one year.
Termination of Service. Options will cease to be exercisable within 30
days after termination of the optionee's service as a Director, other than upon
termination due to death, disability or retirement or upon termination for
cause. Options will be exercisable within twelve months of death or disability
and within three months of retirement. Upon termination for cause, a
participant's options shall be rescinded.
Termination and Amendment of Plan. The Board of Directors may terminate or
amend the Directors Plan without the approval of the Company's shareholders, but
shareholder approval would be required in order to amend the Plan to increase
the number of shares, to change the class of persons eligible to participate in
the Plan, to extend the maximum five-year exercise period or to permit an option
exercise price to be fixed at less than 85% of the fair market value as of the
date of grant.
Antidilution Provisions. The amount of shares reserved for issuance under
the Directors Plan and the terms of outstanding options shall be adjusted in the
event of changes in the outstanding Common Stock by reason of stock dividends,
stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events.
Certain Federal Income Tax Consequences. The following is a brief summary
of the principal federal income tax consequences of awards under the Directors
Plan based upon current federal income tax laws. The summary is not intended to
be exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
<PAGE>
An optionee generally recognizes no taxable income as the result of the
grant of a nonqualified stock option. Upon exercise of such an option, the
optionee normally recognizes ordinary income in the amount of the excess of the
fair market value on the date of exercise over the option price. Upon the sale
of stock acquired by the exercise of a nonqualified stock option, any gain or
loss, based on the difference between the sale price and the fair market value
on the date of recognition of income, will be taxed as short-term or long-term
capital gain or loss, depending upon the length of time the optionee has held
the stock from the date of exercise. No tax deduction is available to the
Company with respect to the grant of the option or the sale of stock acquired
pursuant thereto. The Company would be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the exercise
of the option. Special rules apply under Section 16(b) of the Exchange Act if a
participant exercises an option within six months of the date of grant.
Vote Required. Approval of the Directors Plan will require the affirmative
vote of at least a majority in voting interest of the shareholders present in
person or by proxy at the Annual Meeting and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE DIRECTORS STOCK OPTION PLAN.
COMPENSATION AND RELATED MATTERS
The following table sets forth the compensation of the Company for the
Chief Executive Officer and the Chief Financial Officer for the fiscal year
ended June 27, 1997 and the two preceding fiscal years. No other executive
officer of the Company received more than $100,000 during the fiscal year ended
June 27, 1997.
<TABLE>
<CAPTION>
Summary Compensation Table *
Long Term Compensation
Annual Securities Underlying
Name and Fiscal Compensation
Principal Position Year Salary Options (No. of Shares)
<S> <C> <C> <C>
S.W. Yong, President
and Chief
Executive Officer 1997 $ 306,300 -0-
1996 $ 256,600 -0-
1995 $ 192,000 15,000
Victor T.H. Ming,
Chief Financial 1997 $ 149,000 7,500
Officer
1996 $ 139,959 5,000
</TABLE>
<PAGE>
* S.W. Yong and Victor T.H. Ming are also credited with compulsory contribution
to provident pension fund or other retirement scheme of 8% of their total
compensation in accordance with Singapore law.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
% Of Total
Options To
Options Employees In Exercise Price Expiration
Name Granted Fiscal Year ($/sh) Date
<S> <C> <C> <C> <C>
Victor T.H. Ming 7,500 19% $3.67 12/12/2001
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values *
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised In-
Options at The-Money
FY-End (#) Options at FY-
End ($)
Shares Exercisable/ Exercisable/
Name Acquired on Value Unexercisable Unexercisable
Exercise (#) Realized ($)
<S> <C> <C> <C> <C>
S.W. Yong 88,125 $72,397 26,250/3,750 33,750/11,250
Victor T.H. Ming 12,000 $ 5,135 32,250/5,625 70,045/19,375
</TABLE>
* Table has been adjusted to account for stock split.
Each director who is not an employee of the Company receives a director's
fee of $5,000 per year, plus $1,500 for each Board meeting attended. The
Chairman of the Board receives a fee of $15,000 per year, plus $4,500 for each
Board meeting attended.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has served as independent public accountants to audit
the financial statements of the Company for the fiscal year ended June 27, 1997.
Independent public accountants for the fiscal year ending June 1998 will be
selected by the Board. A representative of Deloitte & Touche LLP will be
present at the Annual Meeting and will have an opportunity to make statements
and respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals at the 1998 Annual Meeting
should submit their proposals in writing to the Secretary of the Company at the
address set forth on the first page of this Proxy Statement. Proposals must be
received no later than July 18, 1998 for inclusion in next year's Proxy
Statement and Proxy Card.
ANNUAL REPORT ON FORM 10-K
Upon the written request of any shareholder, the Company will provide,
without charge, a copy of the Company's Annual Report on Form 10-K filed with
the Commission for the year ended June 27, 1997. This request should be
directed to the Corporate Secretary, Trio-Tech International, 355 Parkside
Drive, San Fernando, California 91340.
GENERAL INFORMATION
The cost of soliciting the enclosed form of Proxy will be borne by the
Company. In addition, the Company will reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Directors, officers
and regular employees of the Company may, without additional compensation, also
solicit proxies either personally or by telephone, telegram or special letter.
At this time, the Board knows of no other business that will come before
the Annual Meeting. However, if any other matters properly come before the
Annual Meeting, the persons named as Proxy holders will vote on them in
accordance with their best judgment.
The Annual Report to Shareholders covering the fiscal year ending June 27,
1997 is being mailed with this Proxy Statement to shareholders of record for
this meeting.
By Order of the Board of
Directors
DALE C. CHEESMAN
Secretary
<PAGE>
EXHIBIT 1
1998 STOCK OPTION PLAN
OF
TRIO-TECH INTERNATIONAL
1. PURPOSES OF THE PLAN
The purposes of the 1998 Stock Option Plan (the "Plan") of Trio-Tech
International, a California corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept or
continue employment or association with the Company or its Affiliates; and
(c) Increase the interest of selected employees, directors and consultants
in the Company's welfare through participation in the growth in value of the
common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a full-time employee
of the Company or of any Affiliate (as defined below) of the Company is eligible
to receive NQOs or ISOs under this Plan. Every person who at the date of grant
is a consultant to, or non-employee director of, the Company or any Affiliate
(as defined below) of the Company is eligible to receive NQOs under this Plan.
The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS
Subject to the provisions of Section 6.1.1 of the Plan, the total number of
shares of stock which may be issued under Options granted pursuant to this Plan
shall not exceed 300,000 shares of Common Stock. The shares covered by the
portion of any grant under the Plan which expires unexercised shall become
available again for grants under the Plan. No eligible person shall be granted
Options during any twelve-month period covering more than 100,000 shares.
<PAGE>
4. ADMINISTRATION
(a) It is intended that this Plan shall be administered in accordance with
the disinterested administration requirements of Rule 16b-3 promulgated by the
Securities and Exchange Commission ("Rule 16b-3"), or any successor rule
thereto.
(b) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee (the "Committee") to which admin-
istration of the Plan, or of part of the Plan, is delegated by the Board (in
either case, the "Administrator"). The Board shall appoint and remove members
of the Committee in its discretion in accordance with applicable laws. If
necessary in order to comply with Rule 16b-3 under the Exchange Act and Section
162(m) of the Code, the Committee shall, in the Board's discretion, be comprised
solely of "non-employee directors" within the meaning of said Rule 16b-3 and
"outside directors" within the meaning of Section 162(m) of the Code. The
foregoing notwithstanding, the Administrator may delegate nondiscretionary
administrative duties to such employees of the Company as it deems proper and
the Board, in its absolute discretion, may at any time and from time to time
exercise any and all rights and duties of the Administrator under the Plan.
(c) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Options; (ii) to determine
the fair market value of the Common Stock subject to Options; (iii) to determine
the exercise price of Options granted; (iv) to determine the persons to whom,
and the time or times at which, Options shall be granted, and the number of
shares subject to each Option; (v) to interpret this Plan; (vi) to prescribe,
amend, and rescind rules and regulations relating to this Plan; (vii) to
determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper.
(d) All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such determinations shall
be final and binding on all persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after ten years from the
date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option agreement, in
form satisfactory to the Company, executed by the Company and the person to whom
such Option is granted; provided, however, that the failure by the Company, the
optionee, or both to execute such an agreement shall not invalidate the granting
of an Option, although the exercise of each Option shall be subject to Section
6.1.3.
<PAGE>
(c) The stock option agreement shall specify whether each Option it
evidences is an NQO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the Administrator may
approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval, and the date of
approval shall be deemed to be the date of grant unless otherwise specified by
the Administrator.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1, NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3,
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result of
any such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.
6.1.2 Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action; provided, however, that the Administrator,
in the exercise of his sole discretion, may permit exercise of any Options prior
to their termination, even if such Options were not otherwise exercisable. In
the event of a merger or consolidation of the Company with or into another
corporation or entity in which the Company does not survive, or in the event of
a sale of all or substantially all of the assets of the Company in which the
stockholders of the Company receive securities of the acquiring entity or an
affiliate thereof, all Options shall be assumed or equivalent options shall be
substituted by the successor corporation (or other entity) or a parent or
subsidiary of such successor corporation (or other entity); provided, however,
that if such successor does not agree to assume the Options or to substitute
equivalent options therefor, the Administrator, in the exercise of his sole
discretion, may permit the exercise of any of the Options prior to consummation
of such event, even if such Options were not otherwise exercisable.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the stock option agreement granting the Option, or (b)
in accordance with a schedule related to the date of the grant of the Option,
the date of first employment, or such other date as may be set by the
Administrator (in any case, the "Vesting
<PAGE>
Base Date") and specified in the
written stock option agreement relating to such Option; provided, however, that
the right to exercise an Option must vest at the rate of at least 20% per year
over five years from the date the Option was granted. In any case, no Option
shall be exercisable until a written stock option agreement in form satisfactory
to the Company is executed by the Company and the optionee.
6.1.4 Option Grant Date. Except in the case of advance approvals
described in Section 5(d), the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.
6.1.5 Nontransferability of Option Rights. No Option granted
under this Plan shall be assignable or otherwise transferable by the optionee
except by will or by the laws of descent and distribution. During the life of
the optionee, an Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax, accounting and financial consequences, may authorize any
one or more of the following additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory note
for all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no additional interest
would be imputed), which promissory note may be either secured or unsecured in
such manner as the Administrator shall approve (including, without limitation,
by a security interest in the shares of the Company); and
(b) Subject to the discretion of the Administrator and the terms
of the stock option agreement granting the Option, delivery by the optionee of
Common Stock already owned by the optionee for all or part of the Option price,
provided the value (determined as set forth in Section 6.1.10) of such Common
Stock is equal on the date of exercise to the Option price, or such portion
thereof as the optionee is authorized to pay by delivery of such stock.
6.1.7 Termination of Employment. If for any reason other than
death or permanent and total disability, an optionee ceases to be employed by
the Company or any of its Affiliates (such event being called a "Termination"),
Options held at the date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within three months of the date of
such Termination, or such other period of not less than 30 days after the date
of such Termination as is specified in the Option Agreement (but in no event
after the Expiration Date); provided, however, that if such exercise of the
Option would result in liability for the optionee under Section 16(b) of the
Exchange Act, then such three-month period automatically shall be extended until
the tenth day following the last date upon which optionee has any liability
under Section 16(b) (but in no event after the Expiration Date). If an optionee
dies or becomes permanently and totally disabled (within the meaning of Section
22(e)(3) of the Code) while employed by the Company or an Affiliate or within
the period that the Option remains exercisable after Termination, Options then
held (to the extent then exercisable) may be exercised, in whole or in part,
<PAGE
by
the optionee, by the optionee's personal representative or by the person to whom
the Option is transferred by devise or the laws of descent and distribution, at
any time within six months after the death or six months after the permanent
and total disability of the optionee or any longer period specified in the
Option Agreement (but in no event after the Expiration Date). For purposes of
this Section 6.1.7, "employment" includes service as a director or as a
consultant. For purposes of this Section 6.1.7, an optionee's employment shall
not be deemed to terminate by reason of sick leave, military leave or other
leave of absence approved by the Administrator, if the period of any such leave
does not exceed 90 days or, if longer, if the optionee's right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute.
6.1.8 Withholding and Employment Taxes. At the time of exercise
of an Option and as a condition thereto, or at such other time as the amount of
such obligations becomes determinable (the "Tax Date"), the optionee shall remit
to the Company in cash all applicable federal and state withholding and
employment taxes. Such obligation to remit may be satisfied, if authorized by
the Administrator in its sole discretion, after considering any tax, accounting
and financial consequences, by the optionee's (i) delivery of a promissory note
in the required amount on such terms as the Administrator deems appropriate,
(ii) tendering to the Company previously owned shares of Stock or other
securities of the Company with a fair market value equal to the required amount,
or (iii) agreeing to have shares of Common Stock (with a fair market value equal
to the required amount) which are acquired upon exercise of the Option withheld
by the Company, subject to the following limitations:
(a) Any election pursuant to clause (iii) above by an optionee
subject to Section 16 of the Exchange Act shall either (x) be made at least six
months before the Tax Date and shall be irrevocable; or (y) shall be made in (or
made earlier to take effect in) any 10-day period beginning on the third
business day following the date of release for publication of the Company's
quarterly or annual summary statements of earnings and shall be subject to
approval by the Administrator, which approval may be given at any time after
such election has been made. In addition, in the case of (y), the Option shall
be held at least six months prior to the Tax Date.
(b) Any election pursuant to clause (ii) above, where the
optionee is tendering Common Stock issued pursuant to the exercise of an Option,
shall require that such shares be held at least six months prior to the Tax
Date.
Any of the foregoing limitations may be waived (or additional limitations
may be imposed) by the Administrator, in its sole discretion, if the
Administrator determines that such foregoing limitations are not required (or
that such additional limitations are required) in order that the transaction
shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3,
or any successor rule thereto. In addition, any of the foregoing limitations
may be waived by the Administrator, in its sole discretion, if the Administrator
determines that Rule 16b-3, or any successor rule thereto, is not applicable to
the exercise of the Option by the optionee or for any other reason.
Any securities tendered or withheld in accordance with this Section 6.1.8
shall be valued by the Company as of the Tax Date.
<PAGE>
6.1.9 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code.
6.1.10 Determination of Value. For purposes of the Plan, the value
of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(b) In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry, the Company's management, and the values of
stock of other corporations in the same or a similar line of business.
6.1.11 Option Term. Subject to Section 6.3.5, no Option shall be
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the stock option agreement is referred to in this Plan
as the "Expiration Date").
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted
under this Plan which are designated as NQOs shall be subject to the following
terms and conditions:
6.2.1 Exercise Price. The exercise price of a NQO shall be not
less than the fair market value (determined in accordance with Section 6.1.10)
of the stock subject to the Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1 Exercise Price.
(a) Except as set forth in Section
6.3.1(b), the exercise price of an ISO shall be determined in accordance with
the applicable provisions of the Code and shall in no event be less than the
fair market value (determined in accordance with Section 6.1.10) of the stock
covered by the Option at the time the Option is granted.
(b) The exercise price of an ISO granted to any person who owns,
directly or by attribution under the Code (currently Section 424(d)), stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate (a "Ten Percent
<PAGE>
Stockholder") shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.10) of the stock covered by the
Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise
of an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of
employment as provided in Section 5(d), the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6.3.4 Vesting. Notwithstanding any other provision of this Plan,
ISOs granted for any optionee under all incentive stock option plans of the
Company and its subsidiaries may not "vest" for more than $100,000 in fair
market value of stock (measured on the grant dates(s)) in any calendar year.
For purposes of the preceding sentence, an Option "vests" when it first becomes
exercisable. If, by their terms, such ISOs taken together would vest to a
greater extent in a calendar year, and unless otherwise provided by the
Administrator, the vesting limitation described above shall be applied by
deferring the exercisability of those ISOs or portions of ISOs which have the
highest per share exercise prices; but in no event shall more than $100,000 in
fair market value of stock (measured on the grant date(s)) vest in any calendar
year. The ISOs or portions of ISOs whose exercisability is so deferred shall
become exercisable on the first day of the first subsequent calendar year during
which they may be exercised, as determined by applying these same
principles and all other provisions of this Plan including those relating to the
expiration and termination of ISOs. In no event, however, will the operation of
this Section 6.3.4 cause an ISO to vest before its terms or, having vested,
cease to be vested.
6.3.5 Term. Notwithstanding Section 6.1.11, no ISO granted to any
Ten Percent Stockholder shall be exercisable more than five years after the date
of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the officer
of the Company designated by the Administrator, accompanied by payment of the
exercise price and withholding taxes as provided in Sections 6.1.6 and 6.1.8.
The date the Company receives written notice of an exercise hereunder
accompanied by payment of the exercise price will be considered as the date such
Option was exercised.
(b) Promptly after receipt of written notice of exercise of an Option and
the payments called for by Section 7(a), the Company shall, without stock issue
or transfer taxes to the optionee or other person entitled to exercise the
Option, deliver to the optionee or such other person a certificate or
certificates for the requisite number of shares of stock. An optionee or
permitted transferee of an optionee shall not have any privileges as a
stockholder with respect to any shares of stock covered by the Option
<PAGE>
until the date of issuance (as evidenced by the appropriate entry on the books
of the Company or a duly authorized transfer agent) of such shares.
(c) Unless exempted by the Administrator, if an officer or director who is
subject to the provisions of Section 16(b) of the Exchange Act exercises an
Option within six months of the grant of such Option, the shares acquired upon
exercise of such Option may not be disposed of until six months after the date
of grant of such Option.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
10. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any limitations
on the power of the Company to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
other than under the Plan.
11. MARKET STANDOFF
Each optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
Company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first registration statement of the Company to become
effective under the Securities Act after the date of adoption of this Plan which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restriction until the end of such 180-day period.
12. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or
<PAGE>
other tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
stockholder approval is advisable; provided, however, that no such amendment
shall, without the approval of the stockholders of the Company, effectuate a
change for which stockholder approval is required in order for the Plan to
continue to qualify under Rule 16b-3 (while it is in effect) or any successor
rule thereto.
13. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the stockholders of the Company, or approval of stockholders of the Company
voting at a validly called stockholders' meeting, is obtained within twelve
months after adoption by the Board. If such stockholder approval is not
obtained within such time, Options granted hereunder shall terminate and be of
no force and effect from and after expiration of such twelve-month period.
Options may be granted and exercised under this Plan only after there has been
compliance with all applicable federal and state securities laws.
<PAGE>
EXHIBIT 2
TRIO-TECH INTERNATIONAL
DIRECTORS STOCK OPTION PLAN
1. Purpose. The Trio-Tech International Directors Stock Option Plan (the
"Plan") is hereby established to grant to directors of Trio-Tech International
(the "Company") a favorable opportunity to acquire Common Stock ("Stock") of the
Company and to create an incentive for such persons to serve on the Board of
Directors of the Company and to contribute to its long-term growth and
profitability objectives.
As used in the Plan, the term "Code" shall mean the Internal Revenue Code
of 1986, as amended. The term "Participant" shall mean the President of the
Company (if he or she is a director of the Company) and any other member of the
Board of Directors of the Company who is not an officer or full-time salaried
employee of the Company. Masculine terms used herein may be read as feminine,
singular terms as plural and plural terms as singular, as necessary to give
effect to the Plan.
2. Administration. The plan shall be administered by the Board of
Directors of the Company (the "Board") or by a committee (the "Committee") to
which administration of the Plan is delegated by the Board (in either case, the
"Administrator"). The Administrator shall determine the meaning and application
of the provisions of the Plan and all option agreements executed pursuant
thereto, and its decisions shall be conclusive and binding upon all interested
persons. Subject to the provisions of the Plan, the Administrator shall have
the sole authority to grant options hereunder, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
conditions of each stock option agreement entered into between the Company and
any Participant, and to make all other determinations necessary or advisable in
the implementation and administration of the Plan.
3. Eligibility. The President of the Company (so long as he or she is a
director of the Company) and all nonemployee directors of the Company shall
participate in the Plan.
4. Stock Subject to Plan. There shall be reserved for issue upon the
exercise of options granted under the Plan 150,000 shares of Common Stock or the
number of shares of Stock which, in accordance with the provisions of Section 8
hereof, shall be substituted therefor. Such shares may be authorized but
unissued shares or treasury shares. If an option granted under the Plan shall
expire or terminate for any reason without having been exercised in full,
unpurchased shares subject thereto shall again be available for the purposes of
the plan.
5. Terms of Options. Each option granted under the Plan shall be
evidenced by a stock option agreement between the person to whom such option is
granted and the Company. Such stock option agreement shall provide that the
option is subject to the following terms and conditions and to
<PAGE>
such other terms and conditions not inconsistent therewith as the Administrator
may deem appropriate in each case:
(a) Option Exercise Price. The exercise price to be paid for each
share of Stock upon the exercise of an option shall be 85% of the fair market
value of the shares on the date the option is granted. As used in this Plan, the
term "date the option is granted" means the first business day in July as of
which the option is granted in accordance with Section 5(b). Fair market value
of the shares shall be (i) the mean of the high and the low prices of shares of
Stock sold on a national stock exchange on the date the option is granted (or if
there was no sale on such date the highest asked price for Stock on such date)
or (ii) if the Stock is not listed on a national stock exchange on the date the
option is granted the mean between the "bid" and "asked" prices of the Stock in
the Nasdaq National Market or the Nasdaq SmallCap Market on the date the option
is granted.
(b) Amount and Date of Grant. Each Participant shall receive a grant
of options for 5,000 shares of Stock or, in the case of the President and the
Chairman of the Board, 10,000 shares of Stock as follows: (i) on the first
business day (i.e., the first day on which Stock of the Company may be traded on
a national stock exchange, the Nasdaq Stock Market or the Nasdaq SmallCap
Market) of July in each year in which such Participant is serving on the Board
of Directors, and (ii) following a Participant's initial election to the Board
of Directors of the Company, provided that if a Participant's initial election
to the Board of Directors occurs after December 31 of the fiscal year first
elected, such initial grant shall be for one-half of that number of shares of
Stock.
(c) Period of Option. Options granted hereunder shall have a term of
five years from the date of grant.
(d) Exercisability. Each option granted under the Plan shall be
exercisable in full at any time and from time to time commencing as of the date
of grant.
(e) Payment for Stock. The option exercise price for Stock purchased
under an option shall be paid in full at the time of purchase. The option
exercise price be payable, at the election of the holder of the option, in whole
or in part either in cash or by delivery of Stock in transferable form, such
Stock to be valued for such purpose at its fair market value on the date on
which the option is exercised. No share of Stock shall be issued until full
payment therefor has been made, and no Participant shall have any rights as an
owner of shares of Stock until the date of issuance to him of the stock
certificate evidencing such Stock.
6. Nontransferability. Options granted pursuant to the Plan shall be
nontransferable except by will or the laws of descent and distribution, and
shall be exercisable during the optionee's lifetime only by him, and after his
death, by his personal representative or by the person entitled thereto under
his will or the laws of intestate succession.
7. Termination of Service. Upon termination of the optionee's service on
the Board of Directors for any reason ("Termination of Service"), his rights to
exercise options then held by him shall be only as follows:
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(a) Death or Disability. Upon the death of any person holding
options granted under this Plan, his options shall be exercisable, by the
holder's representative or by the person entitled thereto under his will or the
laws of intestate succession, only if and to the extent they are exercisable on
the date of his death, and such options shall terminate twelve months after the
date of his death.
(b) Termination for Cause. A Participant's right to exercise stock
options shall be rescinded if the Participant has been found to be engaged
directly or indirectly in any conduct or activity which is in competition with
the Company or is otherwise adverse to or not in the best interest of the
Company.
(c) Termination of Service. Upon the Termination of Service of a
Participant for any reason other than as set forth in Section 7(a) or 7(b)
hereof, his options shall be exercisable only if and to the extent they are
exercisable on the date of his Termination of Service and such options shall
terminate 30 days after the date of his Termination of Service unless the holder
of the options dies prior thereto, in which event he shall be deemed to have
died on the date of his Termination of Service; provided, however, in no event
shall such options be exercised more than five years from the date they are
granted.
8. Adjustment of Shares.
(a) In the event of changes in the outstanding Stock by reason of
stock dividends, stock splits, reverse stock splits, split-ups, consolidations,
recapitalizations, reorganizations or like events, an appropriate adjustment
shall be made in the number of shares reserved under the Plan, in the number of
shares set forth in Section 4 hereof, and in the number of shares and the option
price per share specified in any stock option agreement with respect to any
unpurchased shares. The Company shall give prompt notice to all optionees of
any adjustment pursuant to this Section.
(b) Section 8(a) above to the contrary notwithstanding, in the event
of any merger, consolidation or other reorganization of the Company in which the
Company is not the surviving or continuing corporation or in the event of the
liquidation or dissolution of the Company, all options granted hereunder shall
terminate on the effective date of the merger, consolidation, reorganization,
liquidation, or dissolution unless the agreement with respect thereto provides
for the assumption of such options by the continuing or surviving corporation.
Any other provision of this Plan to the contrary notwithstanding, all
outstanding options granted hereunder shall be fully exercisable for a period of
30 days prior to the effective date of any such merger, consolidation,
reorganization, liquidation, or dissolution unless such options are assumed by
the continuing or surviving corporation.
9. Securities Law Requirements. The Company may require prospective
optionees, as a condition of either the grant or the exercise of an option, to
represent and establish to the satisfaction of legal counsel to the Company that
all shares of Stock acquired upon the exercise of such option will be acquired
for investment and not for resale. The Company may refuse to permit the sale or
other disposition of any shares acquired pursuant to any such representation
until it is satisfied that such sale or other disposition would not be in
contravention of applicable state or federal securities law.
<PAGE>
10. Tax Withholding. If appropriate, the Company shall require an
optionee to pay to the Company all applicable federal, state and local taxes
which the Company is required to withhold with respect to the exercise of an
option granted hereunder.
11. Amendment. The Board of Directors may amend the Plan at any time,
except that without shareholder approval:
(a) The number of shares of Stock which may be reserved for issuance
under the Plan shall not be increased except as provided in Section 8 hereof;
(b) The option price per share of Stock may not be fixed at less than
the price specified in Section 5(a) hereof;
(c) The maximum period during which the options may be exercised may
not be extended;
(d) The Class of persons eligible to receive options under the Plan
as set forth in Section 3 shall not be changed;
(e) This Section 11 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval; and
(f) The provisions of the Plan shall not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
12. Termination. The Plan shall terminate automatically on September 30,
2007. The Board of Directors may terminate the Plan at any earlier time. The
termination of the Plan shall not affect the validity of any option agreement
outstanding at the date of such termination, but no option shall be granted
after such date.
13. Effective Date. The Plan shall be effective upon its adoption by the
Board of Directors of the Company. Options may be granted but not exercised
prior to stockholder approval of the Plan. If any options are so granted and
shareholder approval shall not have been obtained on or before September 30,
1998, such options shall terminate retroactively as of the date they were
granted.
